Morningstar DBRS Finalizes Provisional Credit Ratings on ORL 2024-GLKS Mortgage Trust

DBRS, Inc. (Morningstar DBRS) finalized provisional credit ratings on the following classes of Commercial Mortgage Pass-Through Certificates, Series 2024-GLKS (the Certificates) issued by ORL 2024-GLKS Mortgage Trust:

-- Class A at AAA (sf)
-- Class B at AA (low) (sf)
-- Class C at A (low) (sf)
-- Class D at BBB (sf)
-- Class E at BBB (low) (sf)
-- Class F at BB (low) (sf)
-- Class HRR at B (high) (sf)

All trends are Stable.

The transaction is secured by the fee-simple interest in the Grande Lakes Resort, a 1,592-key, full-service hotel that includes both a 582-key Ritz Carlton and 1,010-key JW Marriott. The 409-acre resort is located within 30 minutes of Orlando's biggest attractions such as Universal Studios and Walt Disney World and is less than 15 minutes from Orlando International Airport. The differentiated hotel brands present different experiences that attract a more diverse guest base across leisure, corporate, and group demand. Morningstar DBRS has a positive view of the collateral considering the significant capital investment made into the property and post-COVID recovery.

The resort offers a strong amenity package with 14 food and beverage (F&B) outlets, three pools, a waterpark and lazy river, a 40,000-square foot (sf) spa and fitness center, an 18-hole golf course, tennis courts, a kids club, and nearly 278,000 sf of meeting and event space. Most of the square footage for the meeting and event space is indoors with a variety of large ballroom offerings, which can be configured based on group needs, and smaller breakout rooms, but there are also outdoor terraces and venues for open-air events. The property's robust amenities appeal to leisure, corporate, and group demand, and allow the property to easily shift segmentation. Both hotels at Grande Lakes Resort have been recognized as Top 5 Hotels in Orlando by US News in 2024, with the Ritz Carlton as number one. Additionally, the Ritz Carlton is a AAA Five-Diamond rated hotel and the JW Marriott is a AAA Four-Diamond rated hotel.

The sponsor acquired the collateral in 2018 for $870.0 million and subsequently invested $139.6 million across the resort. All 1,592 keys have been renovated with a full replacement of hard and soft goods. The Ritz Carlton has received $46.3 million ($79,500 per key) in renovations since 2019 and has an additional $6.1 million planned in 2025. In addition to the comprehensive renovations to the guest rooms, the Ritz has added a 14th-floor lounge known as the Ritz Club, refreshed various F&B outlets, and upgraded the pool areas. The 2025 capital improvements will be targeted toward the meeting rooms. The JW Marriott has seen $91.8 million ($90,900 per key) in renovations since 2019, which included a redesigned lobby, updates to the pool area, including the addition of three waterslides, several reimagined F&B outlets, and a full renovation of the meeting space.

The total loan amount of $800.0 million will be used to refinance $750.0 million in existing CMBS debt (ORL 2023-GLKS), return $34.0 million to the sponsor, and cover closing costs. The two-year floating-rate loan is interest only and has three one-year extension options. The floating rate will be based on the one-month Secured Overnight Financing Rate (SOFR) plus 2.65%. The borrower has entered into an interest rate cap agreement with an assumed SOFR cap of 5.50%.

The borrower sponsor for this transaction will be a joint venture between Trinity Real Estate Investments LLC (Trinity) and Elliott Management Corporation (Elliott). While the subject is their first venture together, Trinity and Elliott have gone on to make several other hospitality-centered investments together. Trinity is a private real estate investment firm that specializes in value-add opportunities. The firm has made over $9.8 billion of investments throughout the U.S., Mexico, Europe, and Japan, and its portfolio comprises more than 7,800 hotel rooms. Elliott has a domestic and international strategy fund with a combined $70 billion under management since July 2024. Since 2009, Elliott has invested more than $13.0 billion in commercial real estate in the U.S., Europe, and Asia. Additionally, Elliott is headquartered in Florida.

Following the recent renovations at the property, the collateral has seen positive momentum in average daily rate (ADR) and revenue per available room (RevPAR) with rates of $361.77 and $240.14, respectively, as of the trailing 12-month period ended September 2024. While ADR and RevPAR are stronger in 2024 than they were in 2023, when they were $345.76 and $236.85, respectively, occupancy continues to lag pre-pandemic levels and has even fallen slightly below 2023 performance at 66.4% compared with 68.5%. This is a somewhat common trend in the hospitality industry as hotels benefitted from pent-up demand following the pandemic, which has since slowed down in 2024. However, because of the timing of the renovations, it is possible that the resort has not fully realized the upside in performance on a go-forward basis.

Morningstar DBRS' credit rating on the certificates addresses the credit risk associated with the identified financial obligations in accordance with the relevant transaction documents. The associated financial obligations are the related Principal Distribution Amounts and Interest Distribution Amounts for the rated classes.

Morningstar DBRS' credit rating does not address non-payment risk associated with contractual payment obligations contemplated in the applicable transaction document(s) that are not financial obligations. For example, the credit ratings do not address Spread Maintenance Premiums.

Morningstar DBRS' long-term credit ratings provide opinions on risk of default. Morningstar DBRS considers risk of default to be the risk that an issuer will fail to satisfy the financial obligations in accordance with the terms under which a long-term obligation has been issued. The Morningstar DBRS short-term debt rating scale provides an opinion on the risk that an issuer will not meet its short-term financial obligations in a timely manner.

ENVIRONMENTAL, SOCIAL, AND GOVERNANCE CONSIDERATIONS
There were no Environmental, Social, or Governance factors that had a significant or relevant effect on the credit analysis.

A description of how Morningstar DBRS considers ESG factors within the Morningstar DBRS analytical framework can be found in the Morningstar DBRS Criteria: Approach to Environmental, Social, and Governance Factors in Credit Ratings (August 13, 2024) at https://dbrs.morningstar.com/research/437781

All credit ratings are subject to surveillance, which could result in credit ratings being upgraded, downgraded, placed under review, confirmed, or discontinued by Morningstar DBRS.

Notes:
All figures are in U.S. dollars unless otherwise noted.

North American Single-Asset/Single-Borrower Ratings Methodology (December 13, 2024; https://dbrs.morningstar.com/research/444612/north-american-single-assetsingle-borrower-ratings-methodology

Other methodologies referenced in this transaction are listed at the end of this press release.

With regard to due diligence services, Morningstar DBRS was provided with the Form ABS Due Diligence-15E (Form-15E), which contains a description of the information that a third party reviewed in conducting the due diligence services and a summary of the findings and conclusions. While due diligence services outlined in Form-15E do not constitute part of Morningstar DBRS' methodology, Morningstar DBRS used the data file outlined in the independent accountant's report in its analysis to determine the credit ratings referenced herein.

The credit rating was initiated at the request of the rated entity.

The rated entity or its related entities did participate in the credit rating process for this credit rating action.

Morningstar DBRS had access to the accounts, management and other relevant internal documents of the rated entity or its related entities in connection with this credit rating action.

This is a solicited credit rating.

A provisional credit rating is not a final credit rating with respect to the above-mentioned securities and may change or be different than the final credit rating assigned or may be discontinued. The assignment of final credit ratings on the above-mentioned securities is subject to receipt by Morningstar DBRS of all data and/or information and final documentation that Morningstar DBRS deems necessary to finalize the credit ratings.

Please see the related appendix for additional information regarding the sensitivity of assumptions used in the credit rating process.

DBRS, Inc.
22 West Washington Street
Chicago, IL 60602 USA
Tel. +1 312 332-3429

The credit rating methodologies used in the analysis of this transaction can be found at: https://dbrs.morningstar.com/about/methodologies.

-- North American Commercial Mortgage Servicer Rankings (August 23, 2024),
https://dbrs.morningstar.com/research/438283
-- Morningstar DBRS North American Commercial Real Estate Property Analysis Criteria (September 19, 2024),
https://dbrs.morningstar.com/research/439702
-- Legal Criteria for U.S. Structured Finance (December 3, 2024),
https://dbrs.morningstar.com/research/444064

For more information on this credit or on this industry, visit https://dbrs.morningstar.com or contact us at info-DBRS@morningstar.com.